Trade Deal Puts U.S. and Canada on the Right Track

The United States, Mexico and Canada will join in a trade deal that updates the existing North American Free Trade Agreement (NAFTA), with the U.S. and Canada coming to agreement just before the self-imposed September 30 deadline and avoiding what could have developed into a costly trade war between the two countries. Mexico and the U.S. had already agreed to move forward with their own bilateral treaty.

The pact is called the U.S.-Mexico-Canada Agreement (USMCA) and President Donald Trump says he’ll sign it by the end of the year. The U.S. Congress must ratify the treaty before it takes effect.

“The new agreement will create more balanced, reciprocal trade that supports high-paying jobs for Americans and grows the North American economies,” the office of the U.S. Trade Representative writes. Also, it “will more effectively support trade in manufactured goods between the United States, Mexico and Canada by removing provisions that are no longer relevant, updating key references, and affirming commitments that have phased in from the original agreement.”

Some specific provisions of the agreement will require that three-quarters of auto content be made in North America, and that almost half of auto content be made by workers earning at least $16 an hour. The USMCA also should create new markets for U.S. dairy exports, because Canada has agreed to reduce tariffs on several types of dairy products. It also aims to protect intellectual property and make it easier for U.S. pharmaceutical companies to sell drugs in Canada.

The three countries agreed the pact will be reviewed in six years. If they choose to renew it at that time, it would remain in effect for a total of 16 years, and could then be renewed for 16 more.

As an association with nearly 20,000 members across North America, NAIOP, along with the Mexico Association of Industrial Parks (AMPIP), has long supported free trade and cross-border investment throughout North America and strongly believes that a free trade agreement should be maintained as a trilateral agreement to foster the best atmosphere for economic growth across the continent. As I wrote in a message to NAIOP members just last week, “NAIOP is, and always has been, a proponent of open, free and fair trade between the U.S. and Canada. Canada is one of the top sources of new foreign direct investment in the United States, and a trade war endangers jobs on both sides of the border.”

Clearly, the deal among the three North American countries achieves a number of important goals. But there remains some work ahead. The USMCA doesn’t reduce the 25 percent tariff on Canadian steel that President Trump imposed over the summer, nor the 25 percent tariff Canada placed on U.S. steel in response. President Trump says he wants to maintain tariffs as a negotiating tool, but these tariffs have a negative impact for the commercial real estate industry because they make it more expensive to build.

There are 14 million U.S. jobs supported by trade with Mexico and Canada, and one out of every six Canadian jobs is related to exports. That last fact helps explain why NAFTA was such a priority issue in Canada, as Maryscott (Scotty) Greenwood, CEO of the Canadian American Business Council, pointed out in a NAIOP webinar over the summer.

While this new deal goes under a different name, it retains and expands many aspects of the NAFTA, which was signed in 1994 and has created a hospitable environment for all investors in all sectors — including commercial real estate.

About NAIOP

Since 1967, NAIOP, the Commercial Real Estate Development Association, has become the leading organization for developers, owners and investors of office, industrial, retail and mixed-use real estate. NAIOP comprises 18,000+ members and provides strong advocacy, education and business opportunities through a powerful North American network. Visit our website at www.naiop.org.